Glossary

Mortgage interest deduction in the Netherlands

Mortgage interest deduction means that you deduct the mortgage interest you paid from your gross income. As a result, you end up paying less income tax. On this page, we tell you all about the deductibility of mortgage interest.

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What is mortgage interest deduction in the Netherlands?


Mortgage interest deduction is a tax deduction for homeowners with a mortgage. 

When you decide to take out a mortgage, you take out a loan from the mortgage lender, with your house as collateral. You pay interest on that loan: mortgage interest. To encourage home ownership, this interest is tax deductible under certain conditions. This is called the mortgage interest deduction.

 

Why is there a mortgage interest deduction?

Mortgage interest relief was once introduced to encourage home ownership. This tax benefit made it more fiscally attractive to own a home. But mortgage interest deduction is not completely uncontroversial. Indeed, opponents feel it is unfair that homeowners get a tax break while renters do not. That is why the mortgage interest deduction has already been phased out since 2014. You can read more about this later on this page.


How does mortgage interest deduction work?

Interest deduction on your mortgage means that you deduct paid mortgage interest from your gross income, which ultimately means you pay less income tax. The interest you pay on your mortgage is tax deductible for up to 30 years.

The mortgage interest deduction has certain conditions. Did you take out your first mortgage in 2013 or later? Then only the interest for annuity and linear mortgages is still deductible, provided the mortgage is repaid in a maximum of 30 years. Do you take out a new or higher mortgage in the meantime? Then you are again entitled to a 30-year deduction on the amount you borrow extra. 


There are more generous rules on mortgage interest deduction for mortgages dating from before 1-1-2013. This is called transitional law.

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Calculate your mortgage tax reduction

Calculating your mortgage interest deduction goes as follows. Say you have an income of €50,000 and you pay 37.48 per cent income tax. That's €18,470 a year. You bought a house this year and you are eligible for mortgage interest relief. Your mortgage is €200,000 with gross monthly payments of €1,015. You pay € 8,935 in mortgage interest in the first year. The WOZ value of your house is € 180,000. The mortgage interest paid is deductible from your income after deducting the notional rental value for owner-occupied houses. In this case, the owner-occupied home forfait is €630 (0.35 per cent of €180,000). Subtract €8,935 in interest and you have a deduction of €8,305 (€630 - €8,935).


The mortgage interest refund is now calculated as follows: your income of €50,000 minus the deduction item of €8,305 is €41,695. Income tax is calculated on this amount. So you now pay only € 15,627 income tax (37.48% of € 41,695). In this example, the right to mortgage interest relief gives you a tax reduction of €2,843 (€18,470 - €15,627), or €237 per month. This brings the net monthly cost of your newly bought home in the first year to €778 (€1,015 - €237).


How much tax benefit you get from the mortgage interest deduction therefore depends on your income. The higher your income, the more benefit.

Note: this is a simplified example calculation to show you how mortgage interest deduction works. The calculated net monthly burden only takes into account home ownership. Based on your overall tax circumstances, including possible tax credits, the calculated tax may differ. The amounts used here are indicative.

Mortgage interest deduction to dissappear?

Since 2014, the mortgage interest deduction for the highest income bracket was phased out by 0.5 per cent each year. Since 2020, the phase-out of the mortgage interest deduction has been accelerated to three per cent per year. From 2023, the mortgage interest deduction rate is linked to the rate of the lowest income bracket. So mortgage interest deduction has not disappeared completely, but mortgage interest deduction limits apply to people with incomes in the highest income bracket.

In 2025, mortgage interest and all other deductible expenses for owner-occupied housing will be maximally deductible at a rate of 37.48 per cent.


Other tax deductions

In addition to the annual mortgage interest, you may also deduct certain costs incurred in the year of purchase once. These include costs incurred to obtain the mortgage, such as valuation costs, advisory costs, notary fees for drawing up the mortgage deed and NHG costs. Penalty interest, which you pay when refinancing your mortgage, is also deductible.

Common costs that you cannot deduct include notary fees for drawing up the deed of conveyance, estate agent's commission, transfer tax and costs for a bank guarantee.


Applying for mortgage interest relief

You don not need to apply for mortgage interest deduction: this happens automatically when you file your annual tax return. If you want a monthly refund of mortgage interest deduction, you can apply for it with a provisional assessment.

 

Read more about tax refunds

 

What happens when your mortgage interest deduction expires in 2031?

Since 2001, the rule has been that you are entitled to mortgage interest deductions for a maximum of 30 years. This means that the tax benefit for all homeowners who bought a house in or before 2001 will expire in 2031. What does this mean for your mortgage and your monthly expenses?

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The information on this page has been verified by:

Ulrich Purperhart